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University Master PlanA Master Plan serves as a blueprint and guide for the vision of the University’s physical growth.The University Of New Mexico Board Of Regents adopted and formalized the University MasterPlan at the September 13, 2011 meeting. A draft version of the Master Plan existed that clearlyindicated the boundaries of the University and laid out the future vision of the various campuses.The draft was first presented to the Board of Regents in August 2009. At that time, the Regentsrequested additional input from various constituents. The purpose of consulting the Master Planwhen making acquisitions is to assure that real property purchases are made in accordance withthat plan and support the mission and vision of the University’s future development. TheUniversity receives Legislative funding; as part of general proposals for future growth, theLegislature requests and requires support for requested real property and capital project funding.The support includes confirmation that the proposed purchase is supported by the Master Plan.PURPOSEThe purpose of the audit is to review the functions performed by RED. More specifically, to: Determine if the University is acquiring properties in accordance with UBP, StateBoard of Finance (SBOF) and Higher Education Department (HED) requirements;Review property lease agreements for compliance with lease terms; andReview the contracted legal services process.SCOPEThe audit focused on the review of the documentation for the University’s property acquisitionsobtained over the fiscal years FY2007-FY2010, and various types of property Lease Agreementsthat were current as of FY2010.AUDIT PROCEDURESThe audit analyzed the acquisitions of real property for compliance with applicable UBP and statestatutes, as well as how the acquisitions support the overall University purpose and mission. Theaudit reviewed compliance with existing UBP and verified receipt of contracted lease revenue.Audit procedures included various University personnel interviews, review of applicable UBP andstate statutes, and research of standard real estate business practices.We selected a judgmental sample of seven of the real property acquisition transactions for reviewto determine compliance with UBP, state statutes that govern the Higher Education Department(HED), and State Board of Finance (SBOF) requirements. We selected eighteen leases from thelist provided for review with compliance with UBP, timely receipt of all lease revenue, andcompatibility with standard real estate business practices. Internal Audit also reviewed the ACC(Lobo Village) lease agreement. In total, Internal Audit reviewed nineteen lease agreements. Theaudit also reviewed the Request for Proposal process for contracted attorney services for realestate transactions.October 11, 2011Real Estate Department Operation2010-08Page 5

OBSERVATIONS, RECOMMENDATIONS AND RESPONSES –Real Estate DepartmentRED DEPARTMENT PROCEDURES MANUALInternal Audit discovered that RED does not have documented department procedures. RED filesdid not always contain required documentation (survey, title insurance, warranty deed, Tax andRevenue appraisal review, purchase agreement, contracted attorney approval, documentation ofHED and SBOF approval, documentation of accordance with the Master Plan) to supportexecution of acquisition duties. Although RED discovered and provided much of thedocumentation prior to completion of the audit, the process is inefficient and there can be noassurance that the items would be located if not for historical knowledge of staff.Written procedures are used to establish what should be done, as well as how, when and bywhom. Procedures normally identify the step-by-step processes of how to implement and carryout policies, including identifying the specific tasks and clarifying roles and responsibilities. Aprocedures manual demonstrates how processes are to work, helps employees understand how toaccomplish their jobs, and assures the information is located in one place for easy reference.They should be used to provide consistency in the processes, which can increase overallefficiency. Procedures can also be used to improve communications, establish strong internalcontrols to meet regulatory compliance, and standardize recording keeping processes to helpreduce waste, fraud and abuse. Well written procedures will provide employees with theinformation needed to effectively make decisions at the most appropriate level, streamlineadministrative processes, and provide the basis for individual and departmental accountability. Inaddition, they can reduce the risk of confusion, the potential for litigation, and providedocumentation for auditors and program reviewers. During a staff transition, written policies andprocedures are essential.In addition, policies and procedures add to the efficiency of operations by minimizing delay inrecreating or researching how a similar situation was handled in the past. They provide a guide toensure that all requirements of any transaction or procedure are appropriately completed.Recommendation 1RED administration should develop and implement a comprehensive procedures manual. Theprocedures manual should include a process to ensure that required documents, (survey, titleinsurance, warranty deed, Tax and Revenue appraisal review, purchase agreement, contractedattorney approval, documentation of HED and SBOF approval, and documentation ofaccordance with the Master Plan) are included in RED files.October 11, 2011Real Estate Department Operation2010-08Page 6

OBSERVATIONS, RECOMMENDATIONS AND RESPONSESResponse from the Real Estate Department DirectorAction ItemsAssigned toTargetedCompletionDateRED Director12 Monthsfollowing FinalAudit ReportCorrective Action PlannedNote: The Audit Report states in the Conclusion:“Based on our audit procedures, it appears that REDconsistently complies with UBPP and staterequirements with regard to acquisitions; however,its standard operating procedures are notdocumented.” With respect to real propertyacquisitions, RED is required by state statute andadministrative regulation to obtain approval of HEDand SBOF following BOR approval. Theseregulations also require specific documentation suchas title commitments, surveys, environmentalassessments, etc. This information becomes part ofthe permanent record of the University. Standardprocedures of RED with respect to acquisitions arelargely determined by its adherence to these statestatutes and regulations. A written proceduresmanual for real property acquisitions will supportthis overall policy regime.Action to be Taken:Draft and implement a comprehensive REDProcedures Manual that conforms with Universityand State policies for real property transactions.CONTRACTED ATTORNEY FEESRED files did not contain documentation of attorney approvals. RED staff did provide anexample of one such approval. RED often contracts with outside legal counsel when completingUniversity real property acquisitions. Internal Audit reviewed six acquisitions and onedisposition transaction of real property; the total amount the University paid to outsidecounselors for those transactions is 120,521.99.The University has a valid Request for Proposal (RFP) for outside counsel services. As a resultof the RFP, a list of attorneys with specialized practice is on hand at the Office of UniversityCounsel. When RED needs to contract for attorney services for a property transaction, theprocess is to review the list and request approval from University Counsel for contracting withthe selected attorney. Per RED, they complete the process by email. RED typically sends anOctober 11, 2011Real Estate Department Operation2010-08Page 7

OBSERVATIONS, RECOMMENDATIONS AND RESPONSESemail request to University Counsel, University Counsel obtains approval from the President,and communicates said approval to RED.Review of selected files indicates that the same attorney is contracted with regularly. Theattorney is on the list of approved attorneys. The process described above does not requireattorney rate comparison to determine if the University may stand to realize cost savings fromcontracting with other attorneys on the approved list. Per RED, the attorneys contracted with areefficient and save time because they are familiar with University transactions.Recommendation 2RED files should contain all required supporting documentation, including support for contractedservices obtained to complete real property transactions. As noted in the recommendationaddressing the RED procedures manual, RED should include documentation of contractedservices as a step in the procedures.Response from the Real Estate Department DirectorAction ItemsCorrective Action PlannedAssigned toTargetedCompletionDateNote: The Real Estate Department, currently andhas consistently in the past, complied with Board ofRegents Policy 2.16 “University Counsel” andprocedures promulgated by University Counsel inthe hiring of outside attorneys to manage itsworkload. Over the last 8 years or so, theseprocedures have become more refined and welldocumented, as reflected in amendments to RPM2.16 in December 2007, which requires priorapproval of the President for outside counsel. As theAudit Report states, the past practice was to requestoutside counsel by electronic mail communicationthe University Counsel, who would obtain necessaryapprovals, including that of the President, and notifyRED and the selected attorney. Currently,University Counsel uses a form to process suchrequests. Billing is monitored by UC using anautomated system, called Serengeti Tracker forreview and approval, which includes RED. TheReport correctly points out that many times theserequests and approvals are not documented in theOctober 11, 2011Real Estate Department Operation2010-08Page 8

OBSERVATIONS, RECOMMENDATIONS AND RESPONSESRED transaction files, however, the UC files,including Serengeti are the “official” record of suchrequests and approvals. The RED Director hasmaintained a Department file of requests andapprovals of outside counsel separate from thetransaction files. The RED Procedures Manual(Recommendation 1) will incorporate a requirementthat all requests and approvals for outside attorneyswill be documented in the RED transaction files inthe future.Action to be Taken:Include copies of all requests to and approvals fromUC for outside counsel in each transaction file.UC will amend the request form to include anestimated budget for the selected attorney.RED DirectorOffice of UniversityCounselImmediately oninterim basis.Formalized inProceduresManual.March, 2012SPACE ALLOCATION COMMITTEE REQUIREMENTRED does not regularly attend monthly Space Allocation Committee Meetings.Per UBP 5200, Allocation and Assignment of Space, the University Space Allocation Committeeis a committee appointed by the President with the purpose to “ oversee assignment to andutilization by the various organizational units of all facilitates and spaces owned or leased by theUniversity.” Per the policy the Space Allocation Committee is charged with reviewing spacerequests and its main function is to promote efficient use of University space. All departmentsrequiring space off campus are required to request approval from the Committee to lease offcampus space.The policy specifically states who is to be part of the Committee and that the University Directorof Real Estate is part of the committee membership.Recommendation 3To facilitate compliance with UBP 5200, the RED Director should appoint someone from theRED staff to attend all Space Allocation Committee meetings. This will help ensure that REDhas a comprehensive catalogue of all University leases.October 11, 2011Real Estate Department Operation2010-08Page 9

OBSERVATIONS, RECOMMENDATIONS AND RESPONSESResponse from the Real Estate Department DirectorAction ItemsAssigned toTargetedCompletionDateRED DirectorImmediately oninterim basis.Formalized inProceduresManual.Corrective Action PlannedNote: RED agrees that the Department shouldremain an active member of SAC, providing specificinput and guidance on consideration of leased space.However, past experience has shown that SACseldom considers leased space to resolve programneeds, as departments often lacks funds necessary toprovide rent under lease arrangements. InternalAudit suggests that this recommendation is neededbecause the SAC may be acting on off-campus leaseproposals without RED knowledge. This is highlyunlikely as SAC is not empowered or authorized tobind the University and thus is keenly aware of REDrole in dealing with leased space proposals and referssuch to the Department as necessary. SAC shouldcontinue its practice of consulting with RED ifleased space is being considered. Plus, LeaseContracts will be entered into the Contract ManagerDatabase being implemented and managed inaccordance with UBPPM Policy 2015 “ContractManagement and Monitoring.”Action to be Taken:RED Director will appoint an RED staff person toattend all Space Allocation Committee meetingswhen leased space is being considered.RED MISSION STATEMENT AND STRATEGIC FRAMEWORKRED does not currently have a completed Strategic Framework. Per review of the University’sStrategic Framework, the section dedicated to Institutional Support Services (ISS) for RealEstate is not complete.A strategic framework communicates the University’s mission and goals and ensures overallsuccess. According to the most recently published Strategic Framework:October 11, 2011Real Estate Department Operation2010-08Page 10

OBSERVATIONS, RECOMMENDATIONS AND RESPONSESStrategic planning in Administration is a continuous work-in-progress, constantlystriving to excel to greater heights each year. This website contains a snapshot ofthe work completed to date and includes an action plan for the following month todate. UNM’s Strategic Framework provides a great opportunity to travel withother members of UNM in the same direction on a path that will lead us to afulfilled vision and our goal of becoming a member of the Association ofAmerican Universities as a validation of our excellence as a minority/majorityinstitution.To continue departmental success and effectively contribute to the University’s StrategicFramework. RED should complete the questions requested by the Strategic Framework found athttp://www.unm.edu/ ubppm/re.htm.Recommendation 4The Associate Vice President for Institutional Support Services should work with the REDDirector to complete the RED Strategic Framework.Response from Vice President for Institutional SupportAction ItemsAssigned toTargetedCompletionDateAVP for ISS & REDDirector4 Monthsfollowing FinalAudit ReportCorrective Action PlannedNote: Annually RED prepares department goals andan action plan that supports ISS, the EVP forAdministration and the University President. ISSwill work with RED to align Department mission,vision and goals with the University StrategicFramework.Action to be Taken:Develop RED Strategic FrameworkLEASE MONITORING PROCESSInternal Audit found the following issues through the course of the lease agreement review:Timely DepositsRED did not timely deposit two of the nine lease payments. RED deposited the payment fromAlpha Chi Omega (1635 Mesa Vista NE) six days after receipt and the payment from Lamar#5120 three days after receipt.October 11, 2011Real Estate Department Operation2010-08Page 11

OBSERVATIONS, RECOMMENDATIONS AND RESPONSESPer UBP 7200:Section 2, “Deposits:”Monies received should be deposited at the University Cashiers Department intactby the next working day following receipt. When less than 50 is involved,monies may be accumulated up to a week. No checks shall be cashed, nopurchases shall be made, and no substitution of cash, checks, or other documentsshall be made from the actual monies received. The Cashiers Department ishoused within the University Bursar's Office, which is the centralized arearesponsible for the cashiering, depository, and collection functions of theUniversity. The Bursar's Office is located in the Student Services Center.The University earns interest on deposited funds. When funds are not promptly deposited, theUniversity suffers loss of interest income. Untimely deposits create a risk of loss or theft ofmonies. The University benefits from short-term interest gain on all its deposits. It is in theUniversity’s best interest to comply with deposit policy UBP 7200, by depositing monies the dayfollowing receipt.Billing and Reconciliation of Accounts ReceivableLease receipts collected by RED are not billed and collected through the University Bursar’scentralized accounts receivable system as required by UBP 7200, Section 3.4. The Real EstateDepartment does not have an exception to UBP 7200 from the Bursar’s office on file.Per UBP 7200:Section 3.4 “Billing

The audit focused on the review of the documentation for the University's property acquisitions obtained over the fiscal years FY2007-FY2010, and various types of property Lease Agreements that were current as of FY2010. AUDIT PROCEDURES The audit analyzed the acquisitions of real property for compliance with applicable UBP and state